§ 4958. Taxes on excess benefit transactions
(a)
Initial taxes
(1)
On the disqualified person
There is hereby imposed on each excess benefit transaction a tax equal to 25 percent of the excess benefit. The tax imposed by this paragraph shall be paid by any disqualified person referred to in subsection (f)(1) with respect to such transaction.
(2)
On the management
In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any organization manager in the excess benefit transaction, knowing that it is such a transaction, a tax equal to 10 percent of the excess benefit, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any organization manager who participated in the excess benefit transaction.
(b)
Additional tax on the disqualified person
In any case in which an initial tax is imposed by subsection (a)(1) on an excess benefit transaction and the excess benefit involved in such transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 200 percent of the excess benefit involved. The tax imposed by this subsection shall be paid by any disqualified person referred to in subsection (f)(1) with respect to such transaction.
(c)
Excess benefit transaction; excess benefit
For purposes of this section—
(1)
Excess benefit transaction
(A)
In general
The term “excess benefit transaction” means any transaction in which an economic benefit is provided by an applicable tax-exempt organization directly or indirectly to or for the use of any disqualified person if the value of the economic benefit provided exceeds the value of the consideration (including the performance of services) received for providing such benefit. For purposes of the preceding sentence, an economic benefit shall not be treated as consideration for the performance of services unless such organization clearly indicated its intent to so treat such benefit.
(2)
Special rules for donor advised funds
(3)
Special rules for supporting organizations
(A)
In general
(B)
Person described
A person is described in this subparagraph if such person is—
(C)
Substantial contributor
For purposes of this paragraph—
(i)
In general
The term “substantial contributor” means any person who contributed or bequeathed an aggregate amount of more than $5,000 to the organization, if such amount is more than 2 percent of the total contributions and bequests received by the organization before the close of the taxable year of the organization in which the contribution or bequest is received by the organization from such person. In the case of a trust, such term also means the creator of the trust. Rules similar to the rules of subparagraphs (B) and (C) of section
507
(d)(2) shall apply for purposes of this subparagraph.
(4)
Authority to include certain other private inurement
To the extent provided in regulations prescribed by the Secretary, the term “excess benefit transaction” includes any transaction in which the amount of any economic benefit provided to or for the use of a disqualified person is determined in whole or in part by the revenues of 1 or more activities of the organization but only if such transaction results in inurement not permitted under paragraph (3) or (4) of section
501
(c), as the case may be. In the case of any such transaction, the excess benefit shall be the amount of the inurement not so permitted.
(d)
Special rules
For purposes of this section—
(e)
Applicable tax-exempt organization
For purposes of this subchapter, the term “applicable tax-exempt organization” means—
(1)
any organization which (without regard to any excess benefit) would be described in paragraph (3), (4), or (29) of section
501
(c) and exempt from tax under section
501
(a), and
(f)
Other definitions
For purposes of this section—
(1)
Disqualified person
The term “disqualified person” means, with respect to any transaction—
(A)
any person who was, at any time during the 5-year period ending on the date of such transaction, in a position to exercise substantial influence over the affairs of the organization,
(D)
any person who is described in subparagraph (A), (B), or (C) with respect to an organization described in section
509
(a)(3) and organized and operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of the applicable tax-exempt organization.[1]
(2)
Organization manager
The term “organization manager” means, with respect to any applicable tax-exempt organization, any officer, director, or trustee of such organization (or any individual having powers or responsibilities similar to those of officers, directors, or trustees of the organization).
(3)
35-percent controlled entity
(5)
Taxable period
The term “taxable period” means, with respect to any excess benefit transaction, the period beginning with the date on which the transaction occurs and ending on the earliest of—
(A)
the date of mailing a notice of deficiency under section
6212 with respect to the tax imposed by subsection (a)(1), or
(6)
Correction
The terms “correction” and “correct” mean, with respect to any excess benefit transaction, undoing the excess benefit to the extent possible, and taking any additional measures necessary to place the organization in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards, except that in the case of any correction of an excess benefit transaction described in subsection (c)(2), no amount repaid in a manner prescribed by the Secretary may be held in any donor advised fund.
(7)
Donors and donor advisors
For purposes of paragraph (1)(E), a person is described in this paragraph if such person—
(8)
Investment advisors
For purposes of paragraph (1)(F)—
(B)
Investment advisor defined
For purposes of subparagraph (A), the term “investment advisor” means, with respect to any sponsoring organization (as defined in section
4966
(d)(1)), any person (other than an employee of such organization) compensated by such organization for managing the investment of, or providing investment advice with respect to, assets maintained in donor advised funds (as defined in section
4966
(d)(2)) owned by such organization.
[1] So in original. The period probably should be a comma.